Seg fund statements get failing grade

Sun Life Financial has earned the highest ranking among Canadian segregated fund providers in a new evaluation of fund statements from Dalbar Inc.

But all nine companies included in the evaluation report saw their scores deteriorate significantly from Dalbar’s last Trends and Best Practices in Segregated Fund Statements report, which was conducted in 2007.

The industry benchmark score dropped to 49.74 on a 100-point scale, from 64.81 in the 2007 report. Dalbar noted that it changed its evaluation criteria following the 2007 report to reflect changes in the industry, which resulted in deviations in the scores.

“Dalbar’s new criteria for evaluating segregated fund statements has yielded significantly different scores compared to the last study conducted, suggesting that firms have not been able to keep up with the changing marketplace,” the company said. “Today’s investors are much more confident and investment savvy than ever, and statements must meet those needs.”

Sun Life advanced to the number one spot from its third place position in 2007, despite seeing its score drop to 59.75 from 71.66. Manulife Financial, which earned in the top spot in 2007 with a score of 74.79, fell to second place with a score of 58.72. In third place on the 2009 ranking was London Life Insurance Company, with a score of 55.64.

Earning the lowest score in this year’s ranking was TD Asset Management, with a score of 35.28.

The scores are generated based on four categories of criteria, which include primary content, secondary content, statement features that strongly impact participants’ ability to access and understand important account information, and design features.

The report found that across the industry, all statements erred in offering too little information. In particular, many statements failed to include the personal rate of return, statistical returns over various time periods, account fees, guarantee amounts, reset options and death benefit guarantee amounts.

“There remains much room for improvement, across the entire industry,” said Jody Bullen, director of strategy and public relations of Dalbar’s Toronto office.

Despite the lower scores in this year’s report, however, Bullen said the company noticed some positive changes in statements.

“Throughout this study, Dalbar found that overall, segregated fund providers have made improvements to their statements,” she said.

The statements that earned the highest rankings were those that included not only the most basic account information and transaction history, but also plan details such as guarantee information and adjusted cost base figures, according to Dalbar. The company also commended statements that promoted the firm’s websites and provided additional contact information for investors seeking additional information.

“Because of the complexities of the segregated fund product, investors may not fully understand all the details on the statement, and many firms were able to provide the appropriate contact information for those questions to be answered,” the company said.

Still, Bullen said the report exposes the need for improvements in segregated fund statements.

“All firms would benefit from providing more targeted messages to the investor, that are specific to their investor profile, demographic, and investment portfolio,” she said.